The Bank of Korea, in its semi-annual report, has highlighted concerns that the persistent rise in housing prices within the Seoul metropolitan area could accelerate household debt levels and threaten South Korea's financial stability. Although the financial system appeared stable in early 2025, the central bank remains vigilant about the rapid increase in real estate prices in Seoul, a region particularly susceptible to economic fluctuations.
There is a growing disparity between housing trends in metropolitan and non-metropolitan areas, exacerbated by regulations on multi-homeownership that have driven demand towards Seoul's prime locations. Policymakers have issued warnings that decreasing interest rates could exacerbate price pressures and boost household lending, acknowledging that the risk of financial imbalances related to the Seoul housing market has recently heightened. Despite the current risk index being lower than during the COVID-19 period, the Bank of Korea emphasized the importance of implementing macroprudential policies and ensuring confidence in a steady housing supply.
